US declines have ‘bottomed out,’ but now stark realism
US declines have ‘bottomed out,’ but now stark realism
19 AUGUST 2020 7:50 AM

Whether a U.S. market is doing poorly or less poorly depends on location and market type, according to STR data. Fortunately, the U.S. reached the bottom months ago, but now the slow, painful process of rebuilding begins.

NASHVILLE, Tennessee—After the four-month calamity that began the COVID-19 crisis outside of China, markets in the U.S. have moved into a phase of blunt realism, according to sources at the 14 August Hotel Data Conference.

“The declines are still shocking, but a little less so,” said Vail Ross, SVP of global business development and marketing at STR, during a general session titled “US hotel industry overview.” (STR is the parent company of Hotel News Now.)

Not surprisingly, urban markets are performing more poorly than rural ones.

Revenue-per-available-room growth was approximately 2% before the fall off the cliff. RevPAR was down 51.7% in March and down 80% in April.

Ross said 11 April was when “the bottom fell out, with four top 25 markets with occupancy under 15%.”

Fast forward to July, the most recent full month of data, and U.S. hotels saw an improvement of sorts, with preliminary RevPAR numbers down 52.3%.

Wide range
Ross said the number of submarkets with less than 25% occupancy has decreased.

At the other end of the market spectrum there is not a single one of the top 25 markets with 100% occupancy.

Vail Ross, STR, said US recovery has started in its submarkets, the chart showing growth in overall occupancy is such destinations, the red areas equating to the amount of submarkets with less than 25% occupancy. (Screen grab: Terence Baker)

RevPAR is widely different across markets, she added, with markets such as Oahu, Orlando, Boston and New Orleans seeing occupancy of less than 15%. New York City and Norfolk/Virginia Beach, Virginia, reported occupancy down just 30%, helped by hotels welcoming frontline workers or being used as hospitals.

Any decreases largely are in parallel with increases in U.S. COVID-19 cases, which for the week ending 8 August amounted to approximately 380,000. Total U.S. RevPAR for that week was down 49.4% compared with the same week in 2019.

“On 4 July, mountain and beach destinations that were open and drivable did better,” Ross said. She cited Virginia Beach again, as well as San Diego, Tampa/St. Petersburg and Detroit.

Prairie promise
Markets that have been locked down again or subject to state mandates evidently saw performance declines.

For the week ending 1 August, RevPAR across different destination types saw urban markets decline the farthest (-72.9%), while small metro towns’ RevPAR declined the least, by 30.3%. Resorts saw a fall of 47.4%; while airports dropped 60.7%.

Outside of the top 25 markets, Colorado Springs proved to be a star, with 91.4% occupancy for the week ending 1 August, followed by McAllen/Brownsville, Texas—which includes San Padre Island—at 91.1% and the New Jersey Shore at 82.8%.

It was not just beach resorts that did well. Prairie destinations such as Idaho (82.6%) and North Dakota (81.4%) saw healthy occupancy, too.

“In June, luxury RevPAR was down 70.8%, while midscale was down only—I said ‘only’—44%,” Ross said.

Pipeline numbers
The big hotel companies still have plans to grow their networks, Ross said.

“We are seeing active pipeline in our ‘Big Six’—Choice, Hilton, Hyatt, InterContinental Hotels Group, Marriott International and Wyndham—and there are in total 214,000 active rooms in construction, mostly in the limited- and select-service sector (70%),” she said.

About 84% of the active U.S. pipeline is linked to those half-dozen firms.

Ross added that rooms in construction peaked in April at approximately 214,700. This is higher than the previous peak of approximately 211,700 rooms in construction seen before the Great Recession in December 2007, although “also, there has been a sharp increase in deferred projects.”*

Three external worries still percolating are the high rate of cancellations, communities worried about hotels and hospitality opening up and continued pessimism about the entire COVID-19 saga, Ross said.

“There has been a slight reduction in positivity since June,” Ross said.

*Correction, 20 August 2020: This story has been updated to correct that the Great Recession began in December 2007.

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